CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
11th Edition
ISBN: 9781259298738
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 5QP
Summary Introduction
To determine: The total real
Introduction:
The term return refers to a profit or gain made on an investment that is usually expressed in terms of percentage or dollars. The percentage total return shows the overall performance and efficiency of the amount invested.
The real rate of return refers to an annual return earned from an investment. This is regulated for fluctuations in price as a result of inflation rate and other external effects.
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Students have asked these similar questions
During the period from 2011 through 2015 the annual returns on small U.S. stocks were -3.76 percent, 18.79 percent, 46.82 percent, 3.39 percent, and -3.40 percent, respectively.What would a $1 investment, made at the beginning of 2011, have been worth at the end of 2015? (Round answer to 3 decimal places, e.g. 52.750.)
Value in 2015
$enter a dollar amount of the investment at the end of 2015 rounded to 3 decimal places
What average annual return would have been earned on this investment? (Round answer to 2 decimal places, e.g. 52.75.)
Average annual return
enter the average annual return per year rounded to 2 decimal places
percent per year.
Assume these are the stock market and Treasury bill returns for a 5-year period:
Year
Stock Market Return (%)
T-Bill Return (%)
2013
35.90
0.21
2014
15.20
0.21
2015
-5.10
0.21
2016
16.90
0.08
2017
25.90
0.10
a. What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Year
Risk Premium
2013
%
2014
%
2015
%
2016
%
2017
%
b. What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
The following return series comes from Global Financial Data.
Year
Large Stocks
LT Gov Bonds
US T-bills
CPI
(Rf asset)
(inflation)
2017
21.83%
6.24%
0.80%
2.07%
2018
-5.28%
-1.25%
1.81%
2.10%
2019
25.45%
3.35%
2.15%
1.10%
2020
18.16%
10.25%
4.50%
1.88%
2021
28.70%
-1.54%
0.40%
7.00%
2022
-19.78%
-8.55%
2.20%
6.50%
Calculate the average nominal return earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)
Chapter 10 Solutions
CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
Ch. 10 - Investment Selection Given that RadNet was up by...Ch. 10 - Investment Selection Given that Transocean was...Ch. 10 - Risk and Return We have seen that over long...Ch. 10 - Prob. 4CQCh. 10 - Effects of inflation Look at Table 10.1 and Figure...Ch. 10 - Risk Premiums Is it possible for the risk premium...Ch. 10 - Prob. 7CQCh. 10 - Returns Two years ago, the Lake Minerals and Small...Ch. 10 - Prob. 9CQCh. 10 - Historical Returns The historical asset class...
Ch. 10 - Calculating Returns Suppose a stock had an initial...Ch. 10 - Calculating Yields In Problem 1, what was the...Ch. 10 - Calculating Returns Rework Problems 1 and 2...Ch. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Bond Returns What is the historical real return on...Ch. 10 - Calculating Returns and Variability Using the...Ch. 10 - Risk Premiums Refer to Table 10.1 in the text and...Ch. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Calculating Real Rates Given the information in...Ch. 10 - Holding Period Return A stock has had returns of...Ch. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Calculating Returns You bought a stock three...Ch. 10 - Calculating Real Returns Refer to Table 10.1. What...Ch. 10 - Return Distributions Refer back to Table 10.2....Ch. 10 - Prob. 18QPCh. 10 - Calculating Returns and Variability You find a...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Calculating Returns Refer to Table 10.1 in the...Ch. 10 - Prob. 23QPCh. 10 - Using Return Distributions Suppose the returns on...Ch. 10 - Using Return Distributions Assuming that the...Ch. 10 - Prob. 26QPCh. 10 - Using Probability Distributions Suppose the...Ch. 10 - Prob. 28QPCh. 10 - Prob. 1MCCh. 10 - Prob. 2MCCh. 10 - Assume you decide you should invest at least part...Ch. 10 - Prob. 4MCCh. 10 - A measure of risk-adjusted performance that is...Ch. 10 - What portfolio allocation would you choose? Why?...
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